BEIJING, March 6 (Reuters) - The green energy car subsidiary of Chinese automaker Beijing Automotive Group plans an initial public offering in 2018, Chairman Xu Heyi said on Monday, adding that the unit should be profitable that year.

China has aggressively promoted battery electric and plug-in hybrid cars, including spending billions of dollars in subsidies, in an effort to cut heavy urban smog and promote technological innovation in its auto sector.

Xu said battery production costs for Beijing Electric Vehicle Co, which is backed by the group's listed subsidiary BAIC Motor Corp, are dropping by 15-20 percent per year.

While the central government is phasing out green car subsidies through 2020, the firm will need government support for only three more years at most, he said.

Xu ruled out as "totally impossible" any risk that the new energy vehicle industry would fall off a cliff when the government withdraws support. (Reporting by Yawen Chen and Jake Spring; Editing by Ruth Pitchford)